- Target is favored to take the largest amount of Toys R Us assets.
- Toys R Us filed for bankruptcy just last week.
- There may be notable competition to Target in the retail space for those assets.
- Follow Target shares in real time.
Target is well positioned to be the biggest beneficiary of the Toys R Us liquidation, according to a Credit Suisse (SIX:CSGN) note from analyst Seth Sigman. Toys R Us filed for bankruptcy Thursday, and will begin liquidating its stores and inventory.
While Amazon (NASDAQ:AMZN) could compete for those assets, Sigman says Credit Suisse sees Target "benefiting disproportionately" to its peers. The key reason is that most Toys R Us stores are right next to Target stores.
With 90% of Toys R Us stores and 96% of Baby R Us stores within five miles of Target stores, "TGT's overlap is higher than in recent case studies, and should be positioned to take a fair share," the note said. Target, it estimated, "captures 15% of addressable Toy R Us store sales, 5% of Baby R Us sales, and 5% of online sales," a total value of $600 million.
This visual shows just how many Toys R Us and Baby R Us stores are close to Target stores.
The report arrives at its conclusion through a case study that showed when retail stores are liquidated, other retailers with a high number of stores near the liquidating store were the main beneficiaries.
When H.H. Gregg closed, Best Buy was able to capitalize on 6-11% of H.H. Gregg sales, Sigman said. Twenty-two percent of Best Buy stores were within five miles of H.H. Gregg stores.
Additionally, when Sports Authority closed, Dick's Sporting Goods was able to capture roughly 10% of its sales, the note said. Dick's had 28% of its stores within five miles of a Sports Authority.
Comparatively, 52% of Target stores are within five miles of Toys R Us stores, which leads Credit Suisse to believe that Target is the favorite in the Toys R Us asset sweepstakes.
But competition may still prove to be thick. Sigman noted 82% of Toys R Us stores have both a Target and a Walmart (NYSE:WMT) nearby.
Target is up 5.22% year-to-date.